I'm 33 years old and have over 480 doors of rental property. I've traveled to over 14 countries and love to experience new cultures, food, beer, exercising, and improving myself. I'm focused on creating long-term wealth for my family.

Follow me as I delve into real estate and show you how to start creating passive income, even if you have a ton of debt and a job you hate.

What You'll find in This Review.

There are 80+ crowdfunding websites, and the majority of them aren't really that good. But, most review sites simply pick the ones with the highest affiliate payout and rank them.

Because of my experience with Fundrise and others, we've created one of the most stringent sets of grading criteria on the web for crowdfunding platforms and we review as many crowdfunding sites as we can.

This strict and well-documented methodology helps us avoid any potential conflicts of interest, and you can see the methodology with the link above. We have 11 overall categories and rank every company based on the information we have and weight the responses based on what we believe is most important.

So, check out the criteria and read the review below about the company and how it stacks up against its competition.

Fundrise - Intro to the Company

Fundrise is one of the early successes in real estate crowdfunding. This platform allows unaccredited investors the opportunity to invest in commercial real estate. The minimum investment amount is $500.

They market REITs. However, unlike traditional REITs, this investment is not liquid. Investors can expect a quarterly dividend payment and whatever appreciation has accrued when the assets investment term has expired.

Disclaimer: When I first wrote this article it was because I invested in Fundrise and enjoyed my experience with it. After some time I came to love it so much that I am now an affiliate. If you click on one of the links and sign-up for Fundrise, I may be compensated a small referral fee at absolutely no cost to you.

Why Try Crowdfunding?

I've been enamored by the idea of crowdfunding since before 2012. Not only have I thought about ways to crowdfund my own investments (though I haven't got to that level yet), but I've also thought about investing in other's real estate deals as well.

I have noticed that real estate is so far behind other areas when it comes to crowdfunding. Real estate investing is still amazingly arcane with how developers find investors, syndicate deals, and then move forward on projects. Why can tech startups find hundreds of millions of dollars in funding practically overnight, even for terrible ideas, but real estate is reserved for a very small and elite group, even when the potential projects are amazing?

So, if you are an experienced investor currently and want to diversify or simplify your portfolio, online investing is a great place. On the other hand, new investors might find online investing a great place to start!

Let's dive in:

What is Fundrise?

Fundrise an investment service that allows you to invest directly in commercial real estate. Fundrise created a marketplace that is fairly transparent and their goal is to "make the process of investing in the highest quality commercial real estate from around the country simple, efficient, and transparent." Essentially, they bridge the gap between the investor and the developer.

As I complained about above, real estate is traditionally very exclusive, and the only investors were those with direct access to the institutions that fund the deals. Fundrise (along with many others) is cutting out the middle-man and allowing us to directly invest. Also, by cutting out the institutions, it should hopefully reduce the overhead expenses and keep our fees low.

Fundrise currently has roughly 100,000 members and they have invested in nearly $3 billion worth of real estate. They let you invest as little as $500 at a time and you get to pick the allocation of the funds into different REITs.

That's how crowdfunding shakes things up. If you'd like a more detailed look about how crowdfunding works, check it out here.

Are you ready to see how they do it? Continue reading this Fundrise review to find out.

Fundrise's Accreditation Requirements

A few years ago Fundrise was for accredited investors only. The SEC released Regulation A which made things available to unaccredited investors, but it was too complicated so most sites used Regulation D instead, which excludes unaccredited investors. The SEC surprised everyone in March 2016 and released Regulation A+ which further simplifies the process for the unaccredited investors to invest.

Fundrise really has been the pioneer in this area and being one of the first (if not the actual first ones) to use Regulation A+ to bring online offerings to the masses....again. I was browsing around their site and found they are actually available to unaccredited investors as well (us unsophisticated masses that can't make good investment decisions). It was a welcome surprise to see the potential for normal people to get their hands on passive real estate investments.

How Does Fundrise Find and Screen Investments?

Fundrise claims to receive over 250 submissions per week with less than 1 percent being approved. According to the Fundrise website, they have a very strict underwriting process that includes the following steps:

1) Sponsor Screening

The first thing they look at is the company and the sponsors. They look only for companies that are well capitalized and have a history of success in top US markets. They claim that only 25% of sponsors move beyond this step.

2) Initial Project Due Diligence

Fundrise is focused on short-term projects that last 1-3 years. Their preferred structure is Senior Secured Debt, Mezzanine Debt, or Preferred Equity. Fundrise investors are senior to the sponsor and "Fundrise investors must get paid back their principal and any owed returns before the company is able to realize any profits."

3) Detailed Underwriting

If the sponsor and project meet the Fundrise requirements, it moves on to the detailed underwriting. The Fundrise underwriting team completes an extensive analysis and review of all these points. The total underwriting checklist contains more than 350 different data points.

I was originally going to include a list of some of the underwriting criteria, but instead I found a cool video and linked it above. Check it out!

4) Purchase by Fundrise

So Fundrise actually funds the deal before putting it on the platform. By pre-funding the deal, they take on a large amount of risk that this project will be good and investors will want it.

Choosing How to Invest With Fundrise

One thing to remember about Fundrise - you are actually investing in a bundle of real estate deals. They've created a revolutionary real estate platform that most of you will be comfortable with.

As you can see, it's generally broken down into high income, balanced, and growth.

Choosing an Investment to Crowdfund with Fundrise

Continuing on with the Fundrise Review... As you can see, there aren't many choices. So how do you get diversification? Simply, they have several eREITs that have invested throughout the country.

By choosing one of their options, Fundrise will suggest an allocation. You can choose if you're focused on current income, future potential, or a balance of the two.

A Real Estate Investment Trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. - Wikipedia

a REIT has a lot of requirements in order to qualify and it needs to distribute 95% of its taxable income to the shareholders. There are also different types of REITs, such as a publicly listed REIT, non-listed REITs. These eREITs offered by fundrise are non-traded REITs as they are not listed or traded on the stock exchange.

According to FINRA, there are a number of risks associated with non-traded REITs, the biggest of which is that it can be very difficult to get your principal back. Other issues are potentially high fees, especially on the front-end and a limited secondary market to sell your shares. In fact, you can read a very scathing review of non-traded REITs if you'd like.

So I decided to do a bit of digging on this eREIT. I was able to pull up the offering circular on the SEC website. Wow, what a hard document to read!

The first thing I wanted to investigate was the fees. Here is a quick breakdown of the fees I was able to find:

Breakdown of the eREIT Fees

Manager - Offering costs of $1,000,000 or roughly 2% f money raised

Acquisition/Origination Fee - Manager - 3% of the amount funded. Paid by borrowers and not by the Fundrise investors

Reimbursement of Acquisition - Manager - Only if not reimbursed by the Borrower - Amount Unknown

Asset Management Fee - 1%

Servicing Fee - 0-0.5% * This is the fee that may be waived if underperforming

Special Servicing Fee - 1% of non-performing assets

Other Fees - Unknown

Commissions - There appears to be no commissions

Redemption of Fundrise eREIT Shares

Here is another complicated one because there are a few variables at play here.

First, Fundrise will only redeem a certain amount of shares per quarter. Once they have redeemed those shares, you will get in line for the following quarter, and so on. Additionally, when you redeem the shares, you will incur a penalty of between 3 and 5% of the share price. Thirdly, Fundrise gets to calculate the value of the shares and it's essentially impossible for us to determine that value on our own.

Less than 6 months - No Redemption Allowed

6 Months to 2 Years - 95%

2 to 3 Years - 96%

3+ Years - 97%

The biggest unknown appears to be the unknown value that Fundrise will place on each share. Upon purchase, each share is worth $10, but that can easily go up or down based upon their valuation. On top of that, you can only get a portion of your money back when you redeem.

Checking the Fundrise Offerings

Fundrise is unique with the fact that you don't actually choose specific projects to invest in. Instead, you choose an investment style and Fundrise helps choose a portfolio allocation across their investments. Below is the actual allocation of my investment money.

Fundrise vs The Competition

Fundrise vs other crowdfunding platforms is really what it comes down to. How does Fundrise compare in this review against others.

Well, at the time of writing there are 11 categories we rank them by. Here they are:

1

Is Fundrise Available in all 50 states? - Yes

2

Do they prefund deals? - Yes

3

Fees? - Approximately 3%

4

Minimum Investment? - $500

5

Co-Investing? - Unknown, but most likely not

6

Bankruptcy Protection? - Yes

7

VC Funding? - Yes

8

Non-Accredited Investors Allowed? - Yes

9

Diverse Property Types? - Yes

10

Equity Investments? - Yes

11

Debt Investments? - Yes

A few months ago, Fundrise was tied in first place with 3 other platforms, but now that they have dropped their minimum investment to $500 from $1,000, now they will take first place with an overall score of 5.5 points out of 6.5 points.

Our rule is the top 5% of sites will get a 5-star ranking, so it's still an overall tie which Fundrise shares with EquityMultiple and RealtyMogul.

Realty Mogul

This platform was founded in 2013 and is for both accredited and unaccredited investors.

Realty Mogul tends to invest in apartment buildings, retail centers and class A office buildings. The minimum investment amount is $1,000. They offer both debt and equity investments and have what is called “private REITs” which are similar to REITs sold on the stock exchange.

To date, they have over 130,000 investors, borrowers and sponsors. Realty Mogul has provided financing to over 135 properties and loans amounting to $280 million.

It's great that you can pick a strategy based on your risk tolerance and investing goals, then Fundrise does the rest.

The Bad Side of Fundrise

It's actually hard to find negatives about Fundrise. But here are the worst parts.

I wish there were more offerings to choose from, or that they came along more often. You're limited to the funds they have available.

It would be great if they brought back individual deal crowdfunding.

Frequently Asked Questions About Fundrise

I get emails and comments all the time about Fundrise, here is a compilation of the most common ones.

Is Fundrise a Scam?

I've invested over 2 years ago now and have received my distributions every single quarter from them.

Also, I've seen them grow and acquire new properties, new investors, and go from a tiny company to probably the most well known crowdfunding company in the real estate space.

I've also spoken to some of the team over the years and they've had the same point of contact over there for these two years. So, there hasn't been high turnover that you might see in some sort of scam of scheme.

So, I believe that NO, Fundrise is not a scam. I'm not part of the company in any way so I can only say it from my point of view and that's what my opinion is.

That does not mean you will not lose money. I haven't lost money, but all investments can lose money. Even if I did lose money, that doesn't make it a scam. It just means I got a bad investment.

Can I Withdraw My Money Once I Invest in Fundrise?

The answer is yes, but with caveats.

When you invest with Fundrise, you are investing in what they call an eREIT, which is essentially a newer version of a real estate fund.

A fund pools money from a lot of investors, then invests that money into a variety of investments from loans to equity. So, you'll own a tiny fraction of tons of different investments.

I'm explaining this again because it illustrates how illiquid your money is. It's basically impossible to sell your portion. Eventually all of the assets will be sold off and capital will be returned, but in the mean time it's not easy to give the initial capital contribution back to the investors.

But, Fundrise does allow you to request to withdraw some money, but they do it periodically a few times a year, and they don't actually have to fulfill it. Additionally, there are some fees based on how long you've invested your money which decrease every year for 5 years.

They do have the ability to reject or delay a withdrawal based on the availability of fund in the account. From my understanding, they've been able to honor every request for withdrawal to this point, but that doesn't mean in the future every request will be met.

The best thing for you to do is to read the offering curricula for each fund you want to invest in, and see what the withdrawal and fee schedule look like.

You've Read The Review

Fundrise Reviews

Ease of Use

Diversity of Investments

Minimum Investment Amount

Restrictions on Who Can Invest

5

Summary

Fundrise is in the top 5% of crowdfunding companies we review. This is a review of Fundrise, a crowdfunding website that brings a new way to invest in commercial real estate investments. They pioneered the eREIT which is available for both accredited and unaccredited investors. They have the lowest investment minimum at just $500.

Eric is an investor that achieved financial independence at the age of 30. He started in 2009 with the purchase of his first triplex and now owns over 470 units.
He spends his time with his family, growing his businesses, diversifying his income, and teaching others how to achieve financial independence through real estate.
Eric has been seen on Forbes, Trulia, WiseBread, TheStreet, and other financial publications.

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Eric,
Excellent review of Fundrise. I was seriously thinking of investing in Real Estate thru this company. This appears to be a great way to legitimately get involved in the field, especially for someone with no experience or expertise. I love how they diversity in different properties. I also like that you can start small, and work your way up. I wish there were more recent comments on your site. I’d like to know how things are going now with you and Fundrise. I’m excited about this company!!! I knew there would be a way to poor investors like myself to start to mingle with the “big guys”.

I did update this article just about 6 months ago so the information is very current. Distributions happen quarterly and not much happens day-to-day as a passive investor in this sort of thing. So, there isn’t a ton to update! I’ll probably push out another update in a couple months just to stay current on what returns I’ve been getting and how things go.

My favorite part of my investment with Fundrise is how you can auto reinvest the dividends. One of the biggest things that bring down overall returns is when dividends get distributed and not reinvested. By compounding the interest, you get way more in the long run. Pretty sure Fundrise is the only crowdfunding type company that is doing the dividend reinvestment option.

I would say that they are not postponed. It would require Fundrise to track your basis in the investment and then report the taxable amount when you sell the investment. I did not see anything regarding that when I signed up and read all the fine print.

First of all, great write up to Eric! Pat, I’m also tracking the performance of my investment on my website if you’re interested. I detail a few additional concerns there, but overall I think it’s well worth a small investment to see how the company performs.

My main concern is that the startup costs could be massive if the company does not raise as much capital as they think they will, so it also might make sense to hold off major investments until the current offerings raise closer to $50 million (the West Coast, East Coast, and Heartland offerings are each at about $10 million right now, which equates to 10% of the current investment going to startup costs – if they raise $50 million, the startup costs are 2%, which is much more reasonable).

Hello Eric and thanks for the review. I would like to make sure I got this right:1.The 3 to 5% fee you pay as an investor is only when you redeem your shares correct?2. As long as you own shares of the eREIT you pay management fees on theses shares correct?3. Does your annualized return take these fees (redemption and management) into account?

No problem and I’m glad you enjoyed it.
I can’t answer questions FOR Fundrise, but I can explain how I understand it.
The fee I believe you are referencing is the redemption fee. That, as the name suggests, is when you redeem the shares and the fee depends on how long the money has been invested. The longer the money is there, the lower the fee.
There are ongoing quarterly management fees (just like every mutual fund, etf, reit, or anything else). The returns I received last quarter (10%) were net of management fees.
I just need to iterate again that I don’t work for Fundrise and I can’t answer questions for them. I can only give you my understanding of things, and you should read the prospectus and filing documents.
I also grabbed this email off their site where you can send questions: [email protected].
I hope I was able to help!

This is potentially a phenomenal company; but, they don’t offer any (to my knowledge) retirement accounts (IRA, Roth IRA, SEP IRA). I consider that to be their biggest flaw; and, enough of one for me to switch to someone who does have that kind of support. I emailed them about this, and apparently they used to offer this, but were driven out of that market, from the expense required to offer them. It’s disappointing, and honestly counter to the saving they promote; these tax-advantaged accounts are absolutely indispensable, for saving.

Wealthfront, or Betterment; heck even Motif, which I honestly think is the future of the equity marketplace (I’m not even affiliated with, or own stock in them). But, in general, consumers should are better protected from downside potential, when buying baskets of diversified stocks (motifs) that align with their interests.

Unfortunately, none of them are crowdfunding. None are real estate either.
I actually have no idea how they are related to this topic at all. This article is for people looking to add real estate to their portfolio.
Everyone already knows that real estate investing is not a replacement to your stocks. But a portfolio that has solid real estate investments outperforms a basket of stocks like the S&P 500.
That’s just a fact.

Fair point yeah; I tend to honestly be a smidge biased towards publicly trade-able equities (stocks). Motif, actually offers REIT Motifs; which, because they have support, for retirement accounts, I would gravitate to them, over Fundrise. This is my only complaint about Fundrise; all they have to do is simply support IRAs, which I believe should be the cheapest to have support for.

A quick look makes me think they are taking a 5% commission. The probably make more if the investment is successful.You, on the other hand are taking a 100% risk. 10% income is nice, this however only works as long as things go well, i.e. when times are good.
Also, you have no control on the operation. If you buy/fix/rent/sell, whatever you do have that control. This on the other hand is a passive investment. You will be taxed, federal and state at your tax rate. No depreciation, no leverage.
Been there, done that as an accredit investor prior to 2007. Did not loose too much money but was not the investment the brochure made you believe it would be.Warren Buffet says her reads the annual report in reverse order: first he reads the notes, that’s where the company puts all the nasty stuff they don’t want you to know but are required to report.
Read the fine print, put yourself in the company’s shoes and understand why this would be a good deal for you.
Not trying to be a wet towel, just encouraging you to look on the downside as well.
Good luck to all.

Thanks for the great info. I think REITs of any type have many risks but still are amazingly popular investments.
The eREITs are still young but appear to be some of the most transparent and low fee REITs out there. Of course, that only matters if you are the kind of investor that wants a REIT.

Looks like I can’t just append to my long(ish) thread above; but, there’s a HUGE red flag with Fundrise. Your redemption is seemingly reduced by the amount you receive as dividends. I just redeemed my initial investment; and, the amount redeemed was reduced by exactly the amount I received, as dividends. It’s possible this is associated with fees; but, I can’t tell, the documentation on it is sparse; plus, the difference matches the amount received in dividends, exactly. So, essentially, my investment appears to have been an interest-free loan; I redeemed within their 90-day trial period; so, I’m really confused. I emailed them, to try and get this resolved; I’ll post an update, when I get one.

A quick search for “redemption” and you’ll find the following in there:

“For the first eightynine (89) days following the settlement of the common shares subject to the redemption request (the “Introductory Period”), the per share redemption price will be equal to the purchase price of the shares being redeemed reduced by (i) the aggregate sum of distributions paid with respect to such shares, rounded down to the nearest cent and (ii) the aggregate sum of distributions, if any, declared but unpaid on the shares subject to the redemption request. In other words, a shareholder would receive back their original investment amount, from the redemption price paid, prior distributions received and distributions that have been declared (and that will be received when paid), but would not receive any amounts in excess of their original investment amount.”

Thanks for finding the relevant clause; it does indeed appear to be in-line with their agreement. Nevertheless, If redeemed within this introductory period though, it amounts to precisely what I alluded to; viz. “an interest-free, short-term loan.” I’ll stick with Wealthfront & Motif, until this market has more competition; you might not see this as a red flag; but, I see it as a borderline absurd way to essentially force investors to tie their funds up with Fundrise, for a lot longer than 90 days, in order to get their principal, and any dividends received, redeemed.

REITs are supposed to be illiquid just like real estate is. I actually find it great that Fundrise offers a 90 day redemption period! If you bought a property and changed your mind after closing, you’re out of luck!

Anyhow, thanks again for bringing this to our attention. The purpose of the review of Fundrise is to help people make informed decisions. Definitely, if you might need the investment money, you should not make the investment!

Hey Eric, this is probably the best fundrise review out there. All the other reviews of fundrise kinda seem like fluff,. But you actually have some of your own money in there.

So let me understand this though. The big difference between fundrise and others is that they are using regulation a+ and have a fund where you invest you cash and they allocate it. Other sites are more deal by deal it seems.

I’ve read a couple of places that Fundrise has some potentially frustrating tax consequences: “Distributions are taxed as ordinary income, as opposed to the 15% tax rate on qualified dividends.” What does this mean exactly and hiw significant of a disadvantage would it be?

Ordinary income is taxed at a higher rate than investment income. This is normal because dividends from REITs (the Fundrise eREIT in this review is also considered a REIT) are considered ordinary.

It’s hard to compare because holding a stock for a longer period of time may allow it to have a lower tax rate, but a corporation is also taxed on its income first, then you pay taxes again on it. REITs are not taxed on their income so you should see higher returns because all the money is passed through before-tax.

So, it’s hard to say exactly which one is better because it will depend on your personal tax rate, the returns of the particular stock you are comparing it to, and the return of the REIT you are investing in.

They cannot tell you exactly. If you got a 10% annual return you would make $100/year or $25/quarter. So over 5 years you would make $500 on a $1,000 investment assuming you got at least a 10% return. Of course returns are not consistently the same, each quarter will vary. So it is impossible to say what your return will be. The example above should help give you an example though.

I am an investor with Fundrise and I concur with what Eric wrote. I total approximately 10% yearly in revenues, I have it re-invested every quarter. Fundrise makes it very easy to invest and keep up with all that is happening with your investment, if you were to do that on your own you’d be spending a tremendous amount of time. The 3% fees that they charge is nothing compared to what every other investment company charges to manage your money. Fundrise is not for everyone. If you don’t want to micro manage your money and you can spare a small amount without it affecting you financially AND understand that it is long term (5 years) then this is the fund for you. 5 years is nothing in investment terms. There is nothing that is get rich quick without major risk, and real estate is much safer than any other venture.

3% fees is nothing? That’s like having an expensive annuity with all the bells and whistles on it. If an investment company is charging your over 3% for a managed investment account you should re-think where your investing your money.

I Really appreciate your effort in sharing your experience. Very clear to the point.
I am a greenhorn when come to investing in REITs. What’s the difference between investing with Fundrise vs all the other REIT stocks? It seems both made similar promises but REIT stock does have established a tradable stock price.

What are you thoughts on facing a recession?
How do you think will a normally periodic 2-3 years recession affect Fundrise Investors?
What are your thoughts on worst case, realistic case, best case scenarios faced by Fundrise Investors if the next recession hits in next few years?

Eric, I have been researching on crowdfunding (Fundrise, RealtyMogul and YieldStreet) for the past few months. But I have yet to decide because the fees structure are so difficult to ascertain.

Regarding Fundrise, please let me know did you pay any initial upfront fee to setup the account. Please let me know is there an annual fee. I’m not concern about an early redemption fee because I am a long-term investor.

I didn’t pay any upfront fees and I haven’t experienced any annual fees other than what’s already described. They have their asset management fee and early redemption fee. You should read the PPM or OC and search under the fees section of Fundrise and others to compare.